PROBLEM $3(6$ POINTS$)$

a$.)$ Determine the implied AED$/$NZD cross rate. $(2$ POINTS$)$

b$.)$ Suppose that the NZD to AED exchange rate is $0\mathrm{.}61$ NZD$/1$ AED. Is there any arbitrage opportunity? If so$,$ start in NZD and explain in words why you think that is the case and the steps to achieve this. $(2$ POINTS$)$

c$.)$ Assume you have $16,400$ AED. What is your profit in AED $($show your calculations$)?(2$ POINTS$)$

PROBLEM $4(5$ POINTS$)$

Assume that you have the following information:

JPY: Japanese Yen; INR: Indian Rupee

a$.)$ What is the One$-$Year JPY Interest rate under parity conditions? Assuming you have $14,200$ INR, show that it is in parity using the "box" method and show the return after $9$ months investing in either Japan or India. $(3$ POINTS$)$

b$.)$ If the One$-$Year JPY rate was $\backslash (4\mathrm{.}2\backslash \%\backslash )$ what would that mean? What are three things that are key to fully take advantage of these types of opportunities? $(2$ POINTS$)$